Via e-mail email@example.com
April 27, 2000
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549-0609
Re: File Number S7-03-00 (Supplementary Financial Information)
Dear Mr. Katz:
I am pleased to comment on behalf of General Mills, Inc. on the Securities and Exchange Commission (SEC) proposed rule on Supplementary Financial Information. We understand the goals of the SEC to improve financial reporting and indirectly to address earnings management issues. However we do not believe these proposed rules achieve either goal. Rather, these rules are counter to the direction that the SEC and the accounting profession have been heading, namely, to simplify disclosures and focus on those disclosures that provide meaningful information to investors.
The proposed Item 302(c) provides "a list of commonly reported loss accrual and/or valuation accounts that the Commission would expect registrants to present within that Item". The list is excessive. Providing detailed activity for each such liability will only add to disclosure overload, without providing useful disclosures to the average reader of financial statements. Of greater concern to us is the likelihood that some of the data asked for ("probable losses from pending litigation" and "contingent income and franchise tax liabilities") would ordinarily be confidential. Providing data regarding probable losses from pending litigation would clearly be disadvantageous to the registrant from the standpoint of litigation strategy, useful to the litigation adversary, and counterproductive to appropriate handling of contentious disputes. It could imply an admission of liability and hamper settlement negotiations. Similarly, providing specific data regarding contingent income tax accruals also could be harmful to the registrant by implying concessions on certain tax issues, adversely affecting negotiations and potentially disclosing strategically useful information to competitors.
The proposed Item 302(d) essentially is a reinstatement of "the informational requirements formerly called for under Rules 12-06 and 12-07" regarding fixed assets activity and adding additional requirements "to include activity involving intangible assets". When Rules 12-06 and 12-07 (regarding fixed assets activity) were eliminated, the SEC appeared to be trying to reduce redundant data from disclosure requirements and acknowledging that the usefulness of such data was not justified relative to the costs of assembling and auditing them. Therefore, reinstating such disclosures and adding disclosures related to intangible assets seems counter to the actions the SEC had been taking to ensure appropriate disclosures.
We appreciate the opportunity to comment on this proposal.
Ivy S. Bernhardson
Sec/SEC Resp Supp Fin Info.doc